Propagating Bad Financial Judgment Down the Family Tree

I have written in the past about the relentless march of the financially clueless. As far as I know, being clueless in matters of personal finance is not genetic. Nevertheless, we should never underestimate the ability of today’s parents to teach their children all of the wrong lessons about managing money.

A recent story in the New York Times makes the point for me. Two students at Sarah Lawrence College were interviewed about college costs. Sarah Lawrence had recently been named the most expensive college in America, costing a wallet-emptying $53,000 plus per year. This is quite a distinction for an institution at which, according to the article, “students are expected to largely design their own academic programs.” (That interesting fact causes Mr. ToughMoneyLove to ask this question: If Sarah Lawrence students have enough intelligence, maturity and wisdom to design their own education, why are they so stupid as to pay educrats $53,000 annually to watch them do it?)

Anyway, the first student (Rosie Young) was living off grandma’s trust fund. The other student – Kayleigh Salstrand – was not so lucky:

She was sitting next to another freshman, Kayleigh Salstrand, 18, from Lake Tahoe, Calif. The two had apparently not discussed money before; Ms. Young was surprised to learn that her friend was on financial aid.

Ms. Salstrand, the daughter of a bank employee and a stay-at-home mother, said she pays about $8,000 (she took out a loan to cover it); the rest is offset by a $39,000 grant from Sarah Lawrence and other aid.

“It is a little crazy that college should cost so much, but I am really happy with my experience here,” she said. “It is absurd, but it is what you have to do. Be in debt for the rest of your life.”

I highlighted my favorite parts of poor Kayleigh’s lament, which actually fit together in a sad way. The daughter of a bank employee apparently has been brought up to believe that a “happy experience” justifies being in debt for the rest of your life. So, what the heck, Kayleigh is financing her self-designed education with $8,000 in yearly loans, giving her an early start on a debt-driven life. Banks lend, people borrow, life in credit-addicted America goes on. Absurd or not, that’s what Kayleigh has been taught to think.

The other $39,000 of Kayleigh’s college costs is provided as a “grant” from the college. Guess who is funding those grants? That would be trust fund babies like Rosie Young, who are paying full tuition, with grandma’s money. Spreading the wealth comes in many forms – another questionable lesson learned. The reporter neglected to ask Rosie if it bothered her (or her grandmother) that some of her tuition money was being transferred to Kayleigh in the form of grants.

So if Rosie and Kayleigh have children, what will they be taught about managing money? I’m not optimistic.

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Comments

It’s too bad that so many families don’t talk more about smart money management. As I was growing up my parents frequently told me that we could not afford things – soda and desserts in restaurants, new toys that I wanted, and a host of other things. My siblings and I always took this news as a simple statement of fact. As I grew older, I learned something that seemed revolutionary – my family was actually quite well off. As I grew older still, I came to realize the connection between that fact that our family was well off and the fact that we were careful about what we spent money on. I am very grateful to my parents for these financial lessons that I got at a young age.

Talking about budgets, saving, investing, taxes, mortgages, debt, and spending strategies with your kids is a great move. Managing money isn’t all that hard. But if nobody teaches you the basic principles, it is easy to start making bad choices.

Thanks for this post. While I do agree that debt is part of life for many of us, I could never be so casual about it. I have student loans, but I worked a part time job and earned scholarships so that my loans wouldn’t be as large, and they should be paid of fairly soon.

My parents made it very clear that life is about choices — and that includes what we do with out money. I’m teaching my son that lesson now. When he takes his allowance to the store, we talk about value, and what would be the best way to spend money. Because a big reason we have a debt problem in this country is because we thing we *need* to have it all — and have it all now.

Good one. I came from an “old money” family that lost everything in the depression. Somehow the lessons about how the “old money” was made and kept were not passed on to anyone later than my grandparents. I grew up woefully uneducated in things finance beyond high school economics.

I knew neither I nor my family could afford to put me through college. I joined the military to foot the bill (good choice). While I was in however, I learned absolutely nothing about money and squandered it (bad choice). Now that I am out and have a family, I continued to squander our money (worse choice).

Now my wife handles the money (best choice I ever made, right after marrying her). She is also from an “old money” family, though it only started in her grandfather’s time, but they look only mildly well off. I am watching and learning, and we will teach our daughter together.

Jimbo – Thanks for your comment and a special thanks for your service in the military. Yours is an excellent example of how we can marry well and use that relationship to fill in educational holes created in our own families. It appears that your daughter will be in good shape in that department.

I am a charge-a-holic. I fell bad and go buy something. I do not even need it, but it makes me feel better. My family was not rich and we grew up hard, but we all had a lot of love. Love and family are the most important things in the world. I will get out of debt and go right back in and I do not even know why except that it makes me feel better to buy things even though I can not afford them. If I could get over this stupid hang up then maybe I could survive. AT 61 you would thing that I would know how to stop, but I really do not know how or why I do this. What can I do to stop and prepare for what little future I have left? I am going back to school to get a college degree. This is something that I have always wanted, but felt that I was too dumb to go to school. Does anyone have any answers so that I can stop this spending so I can get out of debt??? Thanks,